Problem
You are the manager of the UT Coop. You sell stuffed Bevos at a rate of 50 per day with a standard deviation of demand of 30 per day. You sell them for $15 and each Bevo costs you $5.00. Shipping costs from you supplier are $10 per order and it costs you approximately $15 to fill out the order form. Because of your location your holding rate is 30%. Note that you are open 10 hours/day, 7 days/week, 365 days/year.
i. What quantity would you order to minimize your inventory costs?
ii. If you ordered 2,000 Bevos each time, what would your annual inventory costs be? (you do not need to include cost to purchase the Bevos since this is constant regardless of order size)